END OF HISTORY, OR END OF DEMOCRACY?

by Edward S. Herman, 30/9/2002

We have moved to a new form of
market-based totalitarianism. People across the globe are
increasingly cynical and disillusioned about elections and
democracy, as these are proving incapable of serving non-elite
and non-business constituencies...

The forecasts by ideologues of Western triumphalism of an "end of history" and new era of liberal democracy, following the collapse of communism, has been
confuted by history almost before the celebratory tomes could be gotten into print. The sharpening of ethnic conflicts, the punitive occupations, raids, wars
and boycotts (Panama, Lebanon, Kuwait, Iraq, Rwanda, Bosnia, Cuba), the flood of refugees (doubling between 1988 and 1995), the growing income polarization
within and between countries, and the growth of global financial speculation and instability, have been quickly evident.

Less dramatic, but critically important, and
underpinning the more obvious negative developments, has been the
erosion of democracy. Nominal democracy has been spreading, but it
is increasingly drained of substance. People can vote, but they have
no choices that can address their real needs, because, in Baroness
Margaret Thatcher's memorable words, in the New World Order "there
is no other option" to that approved by the corporate and financial
community. Ordinary citizens may want jobs and job security, living
wages, improved health care and housing, and adequate retirement provision.
But if political leaders can come into office only after having been vetted by Mrs. Thatcher's friends, or if, upon election they find that the
financial markets, international institutions (IMF, WTO, World Bank) and the corporate media will punish them relentlesly for pursuing social democratic goals,
they do not survive unless they reverse course. Federal Reserve Chairman Alan Greenspan, speaking before U.S. newspaper editors in Washington, D.C., on April
2nd, expressed the point, approvingly, in terms of the desirable preeminence of economic efficiency: "It has become increasingly difficult for policymakers who
wish to practice, as they put it, a more 'caring' capitalism to realize the full potential of their economies."

Ordinary citizens may still benefit in a regime
of no other options, but only through a trickle-down process, as
service to the corporate community comes first. And if the corporate
community is ruthlessly greedy, grabbing public assets at
bargain-basement prices, pressing a radical dismantling of the
welfare state, a downward redistribution of the tax burden,
debilitating attacks on labor unions, and a tight monetary and
fiscal policy that curbs inflation and, helped by adequate levels of
unemployment, contains
wage rates, there may be a trickle-up. This may be reinforced by the aggressive use of a more mobile capital, affecting both wage rates and government tax and
expenditure policy. In the United States this has produced a notable trickling up, with a 35 percent increase in average productivity since 1973, but with the
median real wage now lower than in 1973 and the tax burden shifted downward. Trickling-up has been even more notorious in Mexico, where real wages are well
below the 1982 level, despite significant productivity advances, and with the corrupt privatization and other abusive features of neoliberal Mexico producing
over 20 new billionaires during the first Salinas term. Russia, of course, beats Mexico hands down in the trickling-up competition, the former apparatchiks and
their criminal and western joint venture partners participating in possibly the greatest looting operation in history, with the vast majority of the population
immiserated by "reform."

The termination of the social democratic option has been a result of both calculated strategies and the spin-off from market developments not aimed primarily at
political influence--notably, technological change, increased concentration, and globalization.
As regards strategy, a
major objective of Mrs. Thatcher's privatization program and assault
on local government was undermining the power of organized labor and
government bodies not easily subject to centralized or business
control. This was a deliberate attack on the kind of intermediate
groups that all liberal pluralistic theories claim are essential for
a viable democracy. The massive corporate investment in thinktanks,
phoney "grass roots" organizations, media institutions, programs and
pundits, and political action committees in the United States and
elsewhere over the past 25 years was also designed to shift the
balance of ideological and political influence away from social
democracy. Edwin Feulner, the head of the corporate-funded, U.S.-
based, and strongly ideological Heritage Foundation, explained the strategy as
analogous to Procter & Gamble's selling of soap, where one
overwhelms the market with the proper messages.

Among the other
developments debilitating democracy have been the growth of TV, the
increasing commercialization and concentration of the media, and the
weakening of union and other non-commercial influences on the
institutions that control the flow of information. The political
power of the centralizing media was symbolized by Tony Blair's
pre-election trip to Australia and Murdoch's subsequent electoral
support of Blair, not surprisingly correlated with Blair's
quasi-Thatcherite agenda. The sharp
increase in the cost of election campaigns has strengthened plutocratic tendencies, transforming formerly social democratic parties into ones hard to
distinguish from those openly serving business. As Thomas Ferguson contends in his book Golden Rule (1995), where investors dominate, "on all issues affecting
the vital interests that major investors have in common, no party competition will take place....and if all major investors happen to share an interest in
ignoring issues vital to the electorate, such as social welfare, hours of work, or collective bargaining, so much the worst for the electorate." Clinton's
contest with Bob Dole in the 1996 U.S. presidential election, for example, was notable for the heavy dependence of both parties on business investors, and the
absence of disagreement and debate on major public policy issues, with neither speaking for a social democratic option.

Most dramatic in its effect on social democracy has been globalization,
and the emergence and strengthening of institutions of a global
economy. While much productive capital is immobile (plant and
equipment), with the greater efficiency of communications systems,
and the increased cross-border security of capital in the New World
Order, capital can more easily shift its new fixed investments and
alter its rates of current production in accord with the "climate of
investment," which of course includes economic policy. Financial
markets are even more potent and immediately influential on
policy-making. The ending of capital controls in the OECD countries
and beyond in the 1980s, spurred financial trading and weakened the
link between commodity trading and foreign exchange (Forex)
turnover. Forex turnover rose from $18 billion to $1.2 trillion per
day between 1977 and 1995, and the ratio of Forex turnover to export value rose from 3.5 to over 64 in that period. The ratio of global official foreign exchange reserves to
daily Forex turnover fell from 15 days in 1977 to one day in 1995. This has greatly diminished the power of central banks to counter exchange rate movements
based on changes in financial market tastes. If financial markets do not like national policies, they "vote" by exit, with major effects on foreign exchange and
interest rates. Financial market preferences are commonly backed up by the lending decisions of the IMF, World Bank, and private bankers. They are also
supported by the dominant domestic media, so that social democrats are quickly under multileveled siege to "balance the budget" and knuckle under or suffer New
World Order medicine.

This discipline can be applied to even modest threats of social democracy. In the United States in the 1970s, the small deficits under Democratic president
Jimmy Carter were found unacceptable by the business community and its representatives and the media became quite vocal over the threat they posed to
"stability." Their reactions, verbal and material, forced Carter into policy constraints that were not imposed on the more business-friendly regime of Ronald
Reagan, who ran far higher deficits in the 1980s. As an illustration of the double standard, Walter Wriston, chairman of Citicorp, stated in 1978 that federal
deficits were "diverting available capital from productive private investments to finance public expenditures. Only a reduction of the federal deficit would
reverse this trend." That was in the Carter years. Speaking before a business group in the Reagan years, Wriston pooh-poohed the threat of deficits, stressing
the difference between capital and operating budgets, noting that "no family I know of expenses its home," which he had not mentioned in connection with the
Carter budgets. The mass media reproduced this attitude: deficits that would have caused hysteria in a regime distrusted by business were viewed calmly in the
Reagan years, and the federal debt was almost tripled without market (or media) repercussions.

Market preferences are now commonly recognized in advance, and adjustment occurs ex ante (a la Blair) or ex post (Mitterand in the early 1980s, Salinas from
1988, Fujimori, Menem, Bob Rae in Ontario, Clinton in 1993, who was going to "put people first" but quickly switched to putting the balancing of the budget
first). The recently victorious center-left coalition in Argentina has not even challenged the currency board scheme which freezes the exchange rate and
strangles the economy, fearing that doing so would stimulate capital flight and cut off foreign capital needed to fund the huge annual debt service. Mexico's
Cardenas traveled to Wall Street immediately after his 1997 election victory to assure the bankers that he would not threaten their interests. The new "leftist"
Korean president's first order of business was to put in place an IMF "cure" that will severely damage his voting constituency. French president Jospin is
struggling valiantly to meet his promises of increased jobs, but his inability or unwillingness to abandon the budget constraints imposed by the EMU agreement
has stymied him.

It is argued by some that despite these market constraints on policy governments can still act, even collectively, in the New World Order - in Globalisation in
Question, Hirst and Thompson cite the ability of governments to establish NAFTA and the WTO, and their collective action in the Persian Gulf War, as
demonstrating this continuing capacity to act. But they fail to point to a single case where collective action was in pursuit of social democratic rather than
transnational corporate ends. They miss the asymmetry in the freedom to act in the New World Order, where governments can serve Mrs. Thatcher's friends, even
create international bodies that compromise national sovereignty in the transnational corporate interest, but not do things they oppose.

It is ironical that the most strenous proponents of the New World Order always emphasized that under Soviet "totalitarian" rule the populace had no choice - "no
other option." In post-Soviet Russia, the majority clearly don't like what is happening to them, but they still have no other option. But leaders and ideologues
of the New World Order are proud to have removed other options from the menu for Russia, Great Britain, and elsewhere. Like the totalitarians of the Soviet era,
they know what is best, and for them the trouble with Soviet totalitarianism was not the absence of choice, but the imposition of the wrong one.

In short, we have moved to a new form of market-based totalitarianism. People across the globe are increasingly cynical and disillusioned about elections and
democracy, as these are proving incapable of serving non-elite and non-business constituencies, but instead reinforce the trend toward inequality, increased
worker insecurity, and erosion of the welfare state. As people abandon the electoral route - and half the voting population in the United States has already
done so - the power of money in politics is reinforced. This effective breakdown of democracy bodes ill for the future, as the majority will eventually seek
non-electoral routes to protect their interests. To recover the options that the New World Order has taken away - and to prevent further consolidation of that
totalitarianism through mechanisms like the Multilateral Agreement on Investment - is now the main task of democrats across the globe.

Edward S. Herman is an economist and media analyst, who taught for many years at the Wharton School, University of Pennsylvania, and is the author of a number
of books, including (with Noam Chomsky) Manufacturing Consent: The Political Economy of the Mass Media (Pantheon, 1988), and most recently (with Robert
McChesney), The Global Media: The New Missionaries of Corporate Capitalism, Cassell, 1997.